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Tuesday, 01 September 20
COVID-19 PUSHES US LNG INTO A TIGHT SPOT - DREWRY
The pandemic-led weak projections for economic growth will derail US LNG exports in full-year 2020 with the country also losing ground in the long term due to major delays in liquefaction projects.
US LNG exports were strong between 2017 and 2019, driven by the shale gas boom, rising demand for natural gas in Asia and higher global LNG prices. The US exported 3.9 million tonnes of LNG in 2016 which increased at a whopping 114% CAGR to 38.2 million tonnes in 2019.
The US is currently the third-largest global LNG exporter with six operational LNG export terminals aggregating 62 mtpa of liquefaction capacity and another 41 mtpa capacity under construction. Brownfiled projects such as Sabine Pass, Corpus Christi, Cameron LNG and Elba Island will reach their full capacities between 2020 and 2027 and greenfield projects such as Golden Pass LNG and Calcasieu Pass will become operational during the same period.
Existing LNG production capacity in the US has been impacted by the pandemic with over 110 LNG cargoes being cancelled by Asian and European customers during June-August due to the low LNG spot price which narrowed the US-Asia and US-Europe price arbitrage. Moreover, major US LNG importers – Japan, South Korea and Taiwan – have seen their LNG demand dwindling, while US-China LNG trade has not been able to pick up as some would have hoped. With projections for LNG spot prices below $5 per MMBtu over the next few years, we expect more cancellations to occur in the coming years making the US a ‘swing LNG producer.’
The ‘second wave’ of LNG liquefaction including mega-LNG projects (such as Driftwood LNG, Port Arthur LNG, Golden Pass, Calcasieu LNG, Plaquemines LNG, Magnolia LNG, Jordan Cove LNG and Rio Grande LNG) constitute over 160 mtpa of planned liquefaction capacity. These projects were initially expected to be operational by 2025, but are currently facing major trouble in securing funding and long-term supply deals required for reaching an FID. Only two projects (Golden Pass and Calcasieu Pass LNG) have attained the FID and have started construction, while over 10 major LNG liquefaction projects which were expected to reach the FID in 2020 have been delayed due to low LNG prices and weak economic growth projections.
The future for these projects looks uncertain as most of them had fixed the all-inclusive selling price for LNG at $8 per MMBtu for Asia ($2 for Henry Hub, $3 for liquefaction, $2-3 transportation) which is highly uncompetitive in the current market. Only a marginal recovery in LNG prices is projected for the next few years which further increases the woes for promoters of the planned projects in securing funding and supply deals. Meanwhile, a major competitor for US LNG, Qatar enjoys a break-even price below $2 per MMBtu as well as proximity to the Asian market. Qatar’s North Field Expansion (NFE) project’s Phase-1 (33 mtpa) and Phase-2 (16 mtpa) are also backed by the government, increasing the probability of their completion and in the process creating more trouble for the planned US projects.
The pandemic has already created severe financial woes for some US projects. For instance, a deal between Driftwood’s promoter Tellurian and India’s Petronet LNG fell through, raising doubts over the proposed 27.6 mtpa project. Although negotiations are still underway, Tellurian faces high competition from Russian and African projects. Shell has also exited the Lake Charles LNG project, increasing the uncertainty of the project for the other participants, while Magnolia LNG’s promoter LNG Ltd has been taken over by another entity after it went bankrupt, delaying the project further.
Some projects like Lake Charles and Rio Grande have gone back to the drawing board and plan to reduce trains to decrease the capex cost while others are cutting workforce and raising loans to keep their projects afloat. Most project developers are hopingfor an easing of US-China tensions and the prospect of securinga share of the rising LNG demand in China, which is projected to grow at over 10% CAGR between 2020 and 2025. However, China’s LNG importers may not be too keen on long-term supply deals with US companies given the current low prices and the uncertainty over US-China trade relations. Ties between China and Qatar are also strengthening with the latter reserving 16 LNG carrier newbuild berths at a Chinese shipyard.
Overall, project delays are expected to hurt the US deeply in the long term while other LNG producers – Qatar, Russia and Mozambique – gain from the narrowing supply-demand gap from 2023 onwards. Qatar has already reserved LNG carrier newbuilding berths at shipyards and has selected a technology partner for the NFE project while Russia’s Arctic LNG-2 is on schedule with added investments made for Arc-7 LNG carriers and large FSUs to keep the Northern Sea Route (NSR) active most of the year.
US LNG woes have had a cascading effect on the LNG shipping market, depressing charter rates. The fall in US-Asia LNG trade has negatively affected shipping demand which, along with cancellations, has increased vessel availability in the market. At present, the fall in charter rates is arrested by a rise in floating storage, but this situation is not sustainable in the long term with LNG prices remaining depressed and over 120 LNG carriers scheduled to be delivered during 2020-21.
An estimated 140 new orders for LNG carriers during 2020-23 would be left hanging if the planned US LNG projects fail to progress. The loss of orders will impact LNG shipyards which have already begun to reel under low orders (only eight vessels were ordered in 1H20). While project-linked ordering from Qatar, Russia and Mozambique will bring some respite the drying up of speculative orders will most certainly be a huge loss for the LNG shipping market as a whole.
To conclude US LNG exports will grow at a slower pace in the coming years as long-term supply deals have already been signed for the under-construction projects. However, stiff competition from other producers amid low LNG prices will impact their share in the Asian market. The fall in US-Asia trade will negatively impact shipping demand and further reduce the number of vessels required for LNG trade. Overall, we expect US LNG exports to be seasonal in the long run with Europe playing a much larger role in the future.
Source: Drewry
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Friday, 23 February 24
STRONG OUTLOOK FOR THE TANKER MARKET IN 2024 AND BEYOND - DNV
Several factors have aligned over the past two years to create a robust and profitable market for tanker owners, which is expected to drive newbuil ...
Friday, 23 February 24
AUSTRALIAN COAL FLOWS TO ASIA HOVER ABOVE LAST YEAR’S VOLUME TONNES - SIGNAL GROUP
In the final days of February, the dry bulk freight market appeared to maintain a relatively stable momentum, particularly evident in the large ves ...
Friday, 23 February 24
RUSSIAN COAL SHIPMENTS FALL 14% AS SANCTIONS BITE - BIMCO
During the first seven weeks of 2024, Russian coal shipments have fallen 14% y/y. Volumes have gradually declined since October 2023 when logistica ...
Thursday, 22 February 24
BIMCO PUBLISHES SHIP FINANCING FORMS TO ENSURE UNINTERRUPTED USE OF SHIPS
BIMCO has published two standard Quiet Enjoyment Letters (QELs), the first standard form QELs available to the industry, to offer a tool that can e ...
Monday, 19 February 24
METALS INVESTMENT: THE DARKEST HOUR IS JUST BEFORE THE DAWN - WOOD MACKENZIE
Things often seem at their worst just before they get better. In terms of meeting our net zero 2050 scenario, we’ve reached a watershed momen ...
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- Pendopo Energi Batubara - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jorong Barutama Greston.PT - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Coastal Gujarat Power Limited - India
- Coalindo Energy - Indonesia
- IEA Clean Coal Centre - UK
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Finance - Indonesia
- Antam Resourcindo - Indonesia
- Orica Mining Services - Indonesia
- Intertek Mineral Services - Indonesia
- Kaltim Prima Coal - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- London Commodity Brokers - England
- Miang Besar Coal Terminal - Indonesia
- Mjunction Services Limited - India
- Directorate Of Revenue Intelligence - India
- Australian Commodity Traders Exchange
- Bayan Resources Tbk. - Indonesia
- Siam City Cement PLC, Thailand
- SMC Global Power, Philippines
- Rio Tinto Coal - Australia
- Independent Power Producers Association of India
- Bhushan Steel Limited - India
- GVK Power & Infra Limited - India
- Bulk Trading Sa - Switzerland
- Indo Tambangraya Megah - Indonesia
- Sindya Power Generating Company Private Ltd
- Commonwealth Bank - Australia
- Gujarat Mineral Development Corp Ltd - India
- Wood Mackenzie - Singapore
- Krishnapatnam Port Company Ltd. - India
- Energy Development Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Borneo Indobara - Indonesia
- Metalloyd Limited - United Kingdom
- Ind-Barath Power Infra Limited - India
- Gujarat Sidhee Cement - India
- Indian Oil Corporation Limited
- Globalindo Alam Lestari - Indonesia
- Ministry of Transport, Egypt
- TeaM Sual Corporation - Philippines
- Renaissance Capital - South Africa
- Billiton Holdings Pty Ltd - Australia
- Formosa Plastics Group - Taiwan
- CIMB Investment Bank - Malaysia
- Romanian Commodities Exchange
- Altura Mining Limited, Indonesia
- San Jose City I Power Corp, Philippines
- Ministry of Mines - Canada
- Eastern Coal Council - USA
- Bukit Baiduri Energy - Indonesia
- Petron Corporation, Philippines
- South Luzon Thermal Energy Corporation
- The Treasury - Australian Government
- Tata Chemicals Ltd - India
- Planning Commission, India
- GAC Shipping (India) Pvt Ltd
- Port Waratah Coal Services - Australia
- Medco Energi Mining Internasional
- Pipit Mutiara Jaya. PT, Indonesia
- Semirara Mining Corp, Philippines
- PetroVietnam Power Coal Import and Supply Company
- PowerSource Philippines DevCo
- Vedanta Resources Plc - India
- PTC India Limited - India
- Kapuas Tunggal Persada - Indonesia
- Dalmia Cement Bharat India
- Vijayanagar Sugar Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Minerals Council of Australia
- Karaikal Port Pvt Ltd - India
- Sical Logistics Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- Ambuja Cements Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Aboitiz Power Corporation - Philippines
- Malabar Cements Ltd - India
- Videocon Industries ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Uttam Galva Steels Limited - India
- Agrawal Coal Company - India
- Merrill Lynch Commodities Europe
- Georgia Ports Authority, United States
- Timah Investasi Mineral - Indoneisa
- Neyveli Lignite Corporation Ltd, - India
- Marubeni Corporation - India
- AsiaOL BioFuels Corp., Philippines
- Posco Energy - South Korea
- Toyota Tsusho Corporation, Japan
- Tamil Nadu electricity Board
- MS Steel International - UAE
- Deloitte Consulting - India
- Oldendorff Carriers - Singapore
- Vizag Seaport Private Limited - India
- Central Electricity Authority - India
- Jaiprakash Power Ventures ltd
- Indogreen Group - Indonesia
- IHS Mccloskey Coal Group - USA
- Coal and Oil Company - UAE
- Kideco Jaya Agung - Indonesia
- PNOC Exploration Corporation - Philippines
- India Bulls Power Limited - India
- Kobexindo Tractors - Indoneisa
- Energy Link Ltd, New Zealand
- Bukit Makmur.PT - Indonesia
- Kartika Selabumi Mining - Indonesia
- Jindal Steel & Power Ltd - India
- Baramulti Group, Indonesia
- Kepco SPC Power Corporation, Philippines
- Australian Coal Association
- Economic Council, Georgia
- SN Aboitiz Power Inc, Philippines
- Latin American Coal - Colombia
- Makarim & Taira - Indonesia
- Attock Cement Pakistan Limited
- Power Finance Corporation Ltd., India
- Sakthi Sugars Limited - India
- Parry Sugars Refinery, India
- Bangladesh Power Developement Board
- SMG Consultants - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Central Java Power - Indonesia
- Anglo American - United Kingdom
- Therma Luzon, Inc, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Siam City Cement - Thailand
- Bahari Cakrawala Sebuku - Indonesia
- White Energy Company Limited
- Edison Trading Spa - Italy
- Cement Manufacturers Association - India
- The State Trading Corporation of India Ltd
- Straits Asia Resources Limited - Singapore
- Gujarat Electricity Regulatory Commission - India
- Meenaskhi Energy Private Limited - India
- Thiess Contractors Indonesia
- Orica Australia Pty. Ltd.
- Alfred C Toepfer International GmbH - Germany
- Binh Thuan Hamico - Vietnam
- International Coal Ventures Pvt Ltd - India
- Standard Chartered Bank - UAE
- Karbindo Abesyapradhi - Indoneisa
- Leighton Contractors Pty Ltd - Australia
- Lanco Infratech Ltd - India
- Xindia Steels Limited - India
- Simpson Spence & Young - Indonesia
- ICICI Bank Limited - India
- Wilmar Investment Holdings
- Sinarmas Energy and Mining - Indonesia
- ASAPP Information Group - India
- Mercator Lines Limited - India
- Star Paper Mills Limited - India
- Bhatia International Limited - India
- Singapore Mercantile Exchange
- Barasentosa Lestari - Indonesia
- Indonesian Coal Mining Association
- Chettinad Cement Corporation Ltd - India
- Larsen & Toubro Limited - India
- The University of Queensland
- Indika Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Iligan Light & Power Inc, Philippines
- LBH Netherlands Bv - Netherlands
- Price Waterhouse Coopers - Russia
- Meralco Power Generation, Philippines
- Grasim Industreis Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Africa Commodities Group - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Maheswari Brothers Coal Limited - India
- Carbofer General Trading SA - India
- New Zealand Coal & Carbon
- Heidelberg Cement - Germany
- Interocean Group of Companies - India
- TNB Fuel Sdn Bhd - Malaysia
- Madhucon Powers Ltd - India
- GMR Energy Limited - India
- Eastern Energy - Thailand
- Thai Mozambique Logistica
- Bhoruka Overseas - Indonesia
- Parliament of New Zealand
- McConnell Dowell - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Sree Jayajothi Cements Limited - India
- Indian Energy Exchange, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- VISA Power Limited - India
- Global Green Power PLC Corporation, Philippines
- Sojitz Corporation - Japan
- Mercuria Energy - Indonesia
- Savvy Resources Ltd - HongKong
- Trasteel International SA, Italy
- Aditya Birla Group - India
- Kohat Cement Company Ltd. - Pakistan
- Chamber of Mines of South Africa
- Mintek Dendrill Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Banpu Public Company Limited - Thailand
- Essar Steel Hazira Ltd - India
- Riau Bara Harum - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Electricity Generating Authority of Thailand
- Global Business Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Electricity Authority, New Zealand
- Sarangani Energy Corporation, Philippines
- Kumho Petrochemical, South Korea
- GN Power Mariveles Coal Plant, Philippines
- European Bulk Services B.V. - Netherlands
- CNBM International Corporation - China
- Bharathi Cement Corporation - India
- OPG Power Generation Pvt Ltd - India
- Goldman Sachs - Singapore
- Semirara Mining and Power Corporation, Philippines
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